Singapore's business optimism dives to near-contractionary levels in Q1 2015: SCCB

BUSINESS optimism in Singapore tumbled to near-contractionary levels in Q1 2015, amid mounting concerns over an intensification of global political headwinds and softer regional demand in the external-oriented sector.

According to the Singapore Commercial Credit Bureau's (SCCB) latest Business Optimism Index (BOI) study, BOI tumbled from +10.79 percentage points in Q4 2014 to +1.11 percentage points in Q1 2015. This marks the second lowest BOI score in two years since Q1 2013 when BOI fell into the contractionary region at -0.82 percentage point. On a year-on-year (y-o-y) basis, overall BOI score fell sharply from +13.13 percentage points in Q1 2014 to +1.11 percentage points in Q1 2015.

This quarter, only three of six indicators have remained in the expansionary region.

For the first time in nearly two years, volume of sales and net profits have both fallen into the contractionary region. According to SCCB, both volume of sales and net profits were the hardest hit as optimism levels deteriorated from +22.14 percentage points to -5.71 percentage points and +17.14 percentage points to -5.00 percentage points, respectively.

Inventory levels are expected to moderate markedly from +3.57 percentage points in Q4 2014 to +1.43 percentage points in Q1 2015. This also marks the lowest inventory level in nearly two years. Inventory levels registered a previous low at +1.46 percentage points in Q2 2014.

Meanwhile, selling prices have remained unchanged at +4.29 percentage points. According to the Monetary Authority of Singapore (MAS), rising cost pressures will likely persist and filter through to prices of goods and services in the months ahead.

Meanwhile, new orders have improved slightly from -13.04 percentage points in Q4 2014 to -9.52 percentage points in Q1 2015. While overall performance of the manufacturing sector has remained subdued, the biomedical manufacturers are anticipating a slightly better quarter ahead as output within the sector expanded.

Hiring sentiment has remained positive in Q1 2015, driven mainly by strong hiring intentions among domestically-oriented local firms. According to SCCB, optimism levels in employment have edged upwards further, from +10.71 percentage points in Q4 2014 to +12.14 percentage points in Q1 2015.